Are your properties still a viable investment?

Data from the National Residential Landlords Association (NRLA) has revealed that 22% of landlords have lost rental income as a result of the pandemic, with 3% of landlords saying they have lost more than half their rental income as a result of COVID-19.

Related topics:  Landlords
Aviram Shahar - Lendlord
15th September 2020
Aviram Shahar 588

In this environment, where there is so much uncertainty for landlords to navigate, it is more important than ever that they stay on top of the information they do have, to ensure they are putting their investment in the best possible position to survive and thrive.

So, as a landlord, what metrics should you be aware of, and how can you track them?

· The first thing to know is your Rental Cover Ratio. This is how much runway you have if your tenants stop paying rent altogether or start paying a reduced rent, perhaps at Local Housing Allowance or Universal Credit rates. It is important to analyse this and measure your cash burn rate so that you can ensure you remain comfortable you have enough cash in extreme cases.

· The occupancy rate of your properties is also important. If you track back and analyse the occupancy rate of each property and across your portfolio, you will have a better idea of what to expect moving forward.

· Net cash flow Vs. Gross cash flow. It’s really important for landlords to track their monthly expenses on each property and on the entire portfolio on an ongoing basis and measure the net cash flow and the "Cash on Cash" return. This shows the cash return on the investment as a percentage and can help you to make a more informed judgement as to whether or not the investment is still working in your favour.

· Evaluate your property for the long run. What are your assumptions in terms of property price appreciation, rental appreciation and inflation? You should carry out due diligence from time to time on the prospects for the areas in which your properties are located and change the assumptions according to the most up-to-date outlook.

Once you have done this, you should take a look at how these assumptions impact your long term metrics to help you review the future opportunity for your properties.

You can also evaluate any potential new acquisition for the long term, based on your assumptions, and this can help you to decide what action to take on existing properties and any new purchases.

When it comes to analysing a new potential acquisition, don’t just consider that property in isolation, but take a holistic view of how your entire portfolio will look if your purchase that particular property.

Staying on top of all of this information can provide you with the clarity and certainty you need to make difficult decisions in an uncertain environment, but it can also be incredibly time-consuming if you choose to analyse the data manually.

However, there are tools available – such as Lendlord – that tackle this problem with technology, helping you to automate your data and easily access the key metrics you need to make the right decisions and grow your property business.

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